2008 Environmental Financial Statement
Baxter's Environment, Health and Safety (EHS) function pioneered its Environmental Financial Statement (EFS) to demonstrate the value of the company’s proactive global environmental management program to senior leadership and other stakeholders.
Baxter modified its health and safety computer-based information management system in the early 1990s to also track certain environmental data, such as waste generation and energy and water usage. At that time, Baxter used separate systems to track packaging information and savings from packaging-reduction projects. Baxter’s EHS organization first prepared its EFS in 1994 (for 1993 data) and presented it in Baxter’s 1993 Environmental Report. Since then the EFS has illustrated the value of Baxter’s proactive environmental program: For the past decade, on average the company has received a return of approximately three dollars for every dollar invested in its environmental initiatives.
Environmental income, savings and cost avoidance totaled $11.9 million for initiatives completed in 2008, or 70 percent of the cost of Baxter's basic environmental program. This amount increased from $7.1 million in 2007 due to additional energy savings, improved non-hazardous and regulated waste management practices, and additional recycling revenue.
Total environmental income, savings and cost avoidance realized in 2008 from environmental initiatives implemented during the prior six years, including 2008, totaled $91.9 million.
Download a PDF copy of Baxter’s 2008 Environmental Financial Statement. See the Case Study: Baxter Shares the Foundation of its Environmental Financial Statement for additional detail about the financial tool.
In compiling the EFS, Baxter uses the following terms and conventions:
Monetary Amounts
Stated in U.S. dollars.
Income
Money received in each of the reporting years.
Savings
Reduction in actual costs between report year and prior year. An increase in actual costs is negative savings.
Cost Avoidance
Costs that would have been incurred had the reduction activity not taken place. Conservation initiatives produce cost avoidance in the year initiated, and in future years in which the resource (such as energy, water or materials) remains eliminated from processes. To be conservative, Baxter stops accumulating cost avoidance from conservation activities after seven years (including the year implemented). This reflects the typical approximate duration of many conservation projects, after which point additional improvements or changes may be made.
Calculating Savings and Cost Avoidance
In calculating savings and cost avoidance for resource reduction activities, Baxter assumes that production and distribution grow at the same rate as the company's cost of goods sold, and that resource use and waste generation quantities increase at that same rate in the absence of reduction initiatives. This rate is determined by calculating the average annual increase in the company's published cost of goods sold over the past six years after adjusting for new acquisitions and changes in inventory, and subtracting inflation, which is calculated as an average of three major, relevant U.S. producer-price indexes and rounding the resulting value down to the nearest whole number to conservatively report performance.
In calculations related to materials use, Baxter uses the current average cost of materials and the compounded growth in business activity.
Undetermined (and Unreported) Environmental-related Costs and Savings
The following undetermined costs are not included in the EFS:
- Environmentally driven materials research and other research and development. These costs are typically offset by increased sales and other non-environmental benefits not reported in the EFS;
- Capital costs of modifying processes and implementing certain resource conservation projects, other than adding pollution controls. These are typically offset by increased production rates, efficiencies and other non-environmental benefits not reported in the EFS;
- Cost of substitutes for ozone-depleting substances and other hazardous materials. This cost is estimated to be relatively minor; and
- Time spent by non-environmental employees on environmental activities. Environmental training and responsibilities are part of every employee's job.
The following undetermined savings are not included in the EFS:
Baxter's global environmental program produces savings and other benefits that are not easily measured and are undetermined and not included in the EFS. Examples include the following:
- Reduced liability exposure resulting from the removal of all known single-wall underground storage tanks (the company removed the majority of approximately 150 such tanks, initially installed to store petroleum or regulated substances, between 1988 and 1993);
- Decreased liability exposure resulting from environmental issues associated with the operation of regulated waste management sites (RWMS) by implementing a program in the 1980s requiring a detailed audit of any RWMS before use by Baxter and periodic re-audits after the initial assessment;
- Reduced risk due to other risk-management programs, including performance of environmental due diligence on all business acquisitions and divestitures, use of a common set of EHS policies throughout Baxter operations, auditing those operations regularly against these policies and using a tracking system to resolve any audit findings;
- Decreased regulatory burden due to Baxter sites reducing waste generation below certain thresholds (decreases training, recordkeeping, reporting and administrative costs);
- Avoided costs for environmental problems that did not occur due to Baxter's proactive efforts;
- Ability for employees to focus on higher value tasks due to the reduction of waste, possible spills and other potential environmental problems;
- Increased good will and brand value, improved company reputation and employee morale, and possible additional sales; and
- Attraction and retention of key personnel in part due to Baxter’s strong environmental program.
